As a buyer, having a house appraise for less than you offered can feel like the end of the world. The deal can’t go through as is, so what are you supposed to do now?
First, don’t stress out. Tons of buyers (and sellers) go through this every day, so you’re not alone. Remember that appraisals are an art, not an exact science. That means that there aren’t any set adjustments that appraisers make. Appraisers use their knowledge and experience to make a judgment about how much the house is worth in a fair market (not leaning towards the buyer or the seller).
When the house appraises for less than you made an offer for, you’ll be looking at something called an appraisal gap. In most cases, a mortgage provider will only lend you the home’s appraised value. When you have an appraisal gap, that’s less than what you need to buy the home at the price you offered. For example, say you offered $350,000 on a house, but it only appraised for $300,000. That $50,000 is the appraisal gap, and chances are, your lender won’t lend you that money–they’ll only lend you $300,000 or the appraised value of the house.
So what are you supposed to do if you find yourself in this situation? You have some options to look at. First, the seller can come down in price to the appraised value.
If they say no, you, the buyer, can pay the gap yourself. Or you and the seller can meet somewhere in the middle.
If none of those options work and you’re just not able to come to a good agreement with the seller, you can back out of the contract. As long as you have an appraisal condition, you can always cancel the purchase contract as a last resort.
An appraisal gap isn’t fun to deal with, I’ll be honest, but it’s not the end of the world. Even if the worst case scenario happens and you have to walk away from the deal, your agent will help you find a home that will be even better for you.
The perfect home is out there, I promise, and I can help you find it! Just reply to this blog or call me today and let’s get you a home that meets all your needs and wants.
Karla Saa
CNE | Broker
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HomeTap.ca
RE/MAX Real Estate Centre Inc., Brokerage.
1140 Burnhamthorpe Road West
Suite 141
Mississauga, ON. L4C 4E9
D: 416-881-3770
karla@hometap.ca | www.hometap.ca
